May 24, 2017 in Mortgages

Mortgage rates remain low, but affordable homes are scarce

It’s a tough time to be a homebuyer, even though mortgage rates are low and going lower. There just aren’t enough homes for sale.

What can you do to compete with other buyers? For one thing, start mortgage-shopping before you make an offer on a house. For another, offer more money, and be flexible and courteous.

Why you can’t find a house

The pace of home resales slowed from March to April, which is the opposite of what you expect at the start of a typical homebuying season. Observers see plenty of demand for houses, but the supply is drying up. At April’s sales pace, there was just a four-month supply of single-family houses for resale, according to the National Association of Realtors. In a balanced market, there would be a six-month supply.

The shortage seems especially acute for lower-priced homes — you know, the ones that first-timers typically buy. The number of houses that resold for less than $100,000 fell 17 percent in April, compared to April 2016. Sales of houses costing between $100,000 and $250,000 fell 6 percent. Sales were up in other price ranges; in fact, resales rose a whopping 19 percent year-over-year for houses priced between $750,000 and $1 million. Not many first-timers are buying houses in that range.

“This mismatch makes landing an affordable home that much tougher, and is keeping many would-be buyers out of the market,” says Joseph Kirchner, senior economist for Realtor.com.

If you’re lucky enough to have found your dream house, search for a mortgage now.

They’re going fast

In April, half of homes sold had been on the market less than a month. When lower- and middle-priced homes hit the market, “interest is immediate and multiple offers are nudging the eventual sales prices higher,” says Lawrence Yun, chief economist for the National Association of Realtors.

When you dive into the market to buy a home, the typical advice is to give your financial information to a lender and get a preapproval. But that’s not enough in an especially competitive market, says Diane Saatchi, real estate broker for Saunders & Associates, on Long Island.

A lender’s preapproval letter means “we will send this to our underwriters, who will probably approve your mortgage, but it’s not a commitment,” Saatchi says. “It’s telling you if everything works out you should be able to get a mortgage.” That iffy proposition might not mean much to sellers who are getting multiple offers.

In such a case, join the bidding war and offer to pay more. Propose to close on the seller’s schedule, whether that means doing it swiftly or waiting a few months. If the seller is emotional about selling the house, send a note of appreciation with a bouquet of flowers.

“You can’t offer less money and flowers, but you can offer more money and flowers,” Saatchi says.

Whether or not you’re caught up in a bidding war, try Bankrate’s mortgage comparison tool.

Mortgage rates this week

The benchmark 30-year fixed-rate mortgage fell this week to 4.13 percent from 4.15 percent, according to Bankrate’s weekly survey of large lenders. A year ago, it was 3.82 percent. Four weeks ago, the rate was 4.19 percent.

The mortgages in this week’s survey had an average total of 0.23 discount and origination points.

Over the past 52 weeks, the 30-year fixed has averaged 3.95 percent. This week’s rate is 0.18 percentage points above the 52-week average.

At the current 30-year fixed rate, you’ll pay $484.94 for every $100,000 you borrow, down from $486.10 last week.

At the current 15-year fixed rate, you’ll pay $706.08 for every $100,000 you borrow, down from $707.54 last week.

At the current 5/1 ARM rate, you’ll pay $444.59 for every $100,000 you borrow, unchanged from last week.

Weekly national mortgage survey

Results of Bankrate.com’s weekly national survey of large lenders conducted May 24, 2017 and the effect on monthly payments for a $165,000 loan:

30-year fixed 15-year fixed 5-year ARM
This week’s rate: 4.13% 3.32% 3.42%
Change from last week: -0.02 -0.03 N/C
Monthly payment: $800.15 $1,165.03 $733.58
Change from last week: -$1.92 -$2.41 N/C